Thursday, April 21, 2011

Reuters reports that "Obama backs lifting income cap for Social Security," referencing proposals to increase the $106,800 earnings cap on which Social Security taxes are applied and (although rarely mentioned) Social Security benefits are calculated. At an event on Tuesday in Annandale, Virginia, the president said:

For the vast majority of Americans, every dime you earn, you're paying some in Social Security. But for (billionaire investor) Warren Buffett, he stops paying at a little bit over $100,000 and then the next $50 billion he's not paying a dime in Social Security taxes.

I very much doubt that Warren Buffet has $50 billion of any kind of income, much less that it's earned income (the kind that Social Security taxes). And, in a recent Retirement Policy Outlook, I raise a number of policy issues regarding an increase in the tax max. But it's clear that President Obama would like to increase the tax max.

What's not clear is that he actually "backed" it. I was expecting at some point a punch line like "And so, my fellow Americans, I favor increasing the tax max." (The full transcript of the discussion is available here.) Not with this president, who's very postmodern and subtle. He leaves it to the listener to infer what he wants. Sort of like watching a French movie.

But at some point I can't blame Congressional Republicans—and Democrats, too, for that matter—if they yell out, "Just say it!" Increasing the tax max would constitute a tax increase for the "middle class," defined in the president's terms as those with incomes less than $250,000. Everyone knows that if the President wants to balance the budget without significant reductions in the programs he cares about, he's going to need to increase taxes on people with more modest incomes. If so, there's no time like the present to make that clear.

About me

I am a Resident Scholar at the American Enterprise Institute in Washington, where my work focuses on Social Security policy. Previously I held several positions within the Social Security Administration, including Deputy Commissioner for Policy and principal Deputy Commissioner. Prior to that I was a Social Security Analyst at the Cato Institute. In 2005 I worked on Social Security reform at the White House National Economic Council, and in 2001 I was on the staff of the President's Commission to Strengthen Social Security. My Bachelor's degree is from the Queen's University of Belfast, Northern Ireland. I have Master's degrees from Cambridge University and the University of London and a Ph.D. from the London School of Economics and Political Science. I can be contacted at andrew.biggs @ aei.org.